Economic repercussions of Indo-China War.

‘All war is a symptom of man’s failure as a thinking animal.’

John Steinbeck

The speculation of the Indo-China military conflict is on the rise since the standoff (May 05) between the Indian and Chinese Army at Pangong Tso Lake, Ladakh, due to the border dispute. Both countries had deployed relatively small units of Army opposite each other in the disputed region. The escalation of this situation into an Indo-China war cannot be ruled out, due to the history of India-China conflicts. Indo-China war would have severe economic repercussions, not only for India and China, but for the world too. On appreciating the seriousness of the situation, the US President Donald Trump has recently tweeted that the US is ready to mediate between India-China to resolve the situation, arose due to border disputes. The border between China and India is not properly marked due to the Himalayan region. Both countries claims and counterclaims on territories occupied by each other, as their own, which causes border disputes.

Both India and China are two economic powerhouses and Militarily strong nation. Indo-China has a combined population of nearly 2.7 Billion. An escalation of the border dispute into a full-scale military conflict would be disastrous, not only for India and China but also for the world. The world is already facing an economic and humanitarian crisis as COVID-19, and a war between these two would further deteriorate the situation.

There are the huge economic consequences of a conventional war between two nuclear armed nations due to their prominent role in world economy.

China is the largest manufacturer of medical devices, electronics components, textiles, and other industrial materials. On the other hand, India is the largest supplier of raw material for drug manufacturing, including Chloroquine, and also has a large service sector, serving the world especially the US and Europe. An Indo-China war would interrupt the supply of medical devices and drugs, that would impact the treatment of COVID-19 patients and its containment, especially in poor African countries. Countries in Europe and Africa are very much dependent on the supplies of some particular textiles, machinery, and electronic devices from China and India. These consumers, far from India and China, would feel the pinch of the war in the form of less or deferred supply. Both India and China are crucial for the revival of the world economy and to find the solution of COVID-19.

If a conventional war broke out between India and China, their neighbors, mostly poor countries, such as Nepal, Bangladesh, Bhutan, Myanmar, and Pakistan would get impacted severely.

Economic Repercussions for Neighbors of India and China.

Economic repercussions for Indo-China neighbors
India and its neighboring countries.


Nepal would suffer a shortage of essential food items such as Wheat and Sugar and Oil. Considering the geographical location of Nepal, it can only import and export goods via land and air routes passing through China or India. It would not be able to get supplies from the third country, until, clears by one of the nations. Nepal earns a large revenue from tourism, and it is anticipating a rise in revenue once the COVID-19 threat subsidized. But a war between India and China would adversely affect tourism in Nepal due to the safety concern of the tourist.


Pakistan has a large presence of Chinese investment and companies. The economic revival of Pakistan, post COVID-19 is heavily dependent on Chinese help in the form of aid and loans. China is developing different areas including, Gwadar port and other industries in Pakistan, important for revenue and employment generation. The war would hamper these projects in Pakistan, and would further aggravate the financial condition of Pakistan. A war with India would necessarily curtail the capability of China to help Pakistan in different areas, at least for the short term.


Bhutan depends heavily on India for essential and non-essential items. Bhutan is geographically located between India and China, and near, another highly disputed area between India and China, region Dokhlam in the west, and less disputed Arunachal Pradesh in the east. An Indo-China war would heavily militarize the area around Bhutan. Bhutan, like Nepal, is a landlocked country and could only get supplies from the land and air routes passing through India. Bhutan also exports electricity to India, and which contributes to 27% of Bhutan’s GDP. The war would affect the power supply, hence the economy of Bhutan adversely. Alike Nepal, Bhutan is also dependent on revenue from tourism, and tourists avoid a country, located between the two warring nations.


Repercussions on international trade due Indo-China war
International Trade.

Both India and China are huge markets for all consumer goods as well as industrial machinery due to the rapid expansion of their economy. The war between them would affect the economic activities in both the countries and henceforth decrease the income and demand for consumer goods. The supply chain and the purchasing power of the consumers would also be negatively impacted. Consumption would be the key to improve the economic condition, deteriorated due to COVID-19. A full-scale conventional war between the neighbors, the demand for many consumer goods would decrease. The countries having business ties with India and China would temporarily, lose a large source of revenue. The consumer would also get deprived of good quality, low-cost products, at the time of economic strain.

The most devastating effect of war would be bear by the billions of citizens of India and China. The millions of people of India and China still lack basic amenities including food, electricity, and education. A war for poor citizens of both countries means prolonging of their condition and continuous poverty. The funds meant for the social upliftment of these people would be diverted to service the war expenditure. After the end of the war too, the general public pays heavy taxes to rebuild the economy. Moreover, both countries’ deficit would increase due to loss of business and war expenditure. An exponential rise in unemployment is another phenomenon that countries have to tackle in the post-war scenario.

India and China has now activated diplomatic channels and negotiation to resolve the standoff amicably. Both the countries should consider the repercussions of war seriously, before looking for the militarily resolution of the dispute.

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